Should You Sell Your Home or Keep it as a Rental?

By Laura Melquist

Meet Laura Melquist, a Realtor whose journey from Division 1 basketball to real estate has been nothing short of inspiring. With a winning mindset cultivated on the court, Laura has translated this into real estate by being a negotiation expert, navigating the real estate market for both sellers and buyers.

Are you stuck wondering if you should sell your home or turn it into a rental? It’s a tough decision, and I get it—it’s not always clear what the best choice is.

You have two main options. First, you can sell your home and take out the equity. It’s straightforward and gives you access to cash right away, which can be helpful if you’re ready to move on or invest elsewhere. The second option is turning your home into a rental. This is becoming more popular significantly since rents are rising in many areas. It’s a great way to generate passive income, but there are a few important steps before jumping in.

If you’re thinking about renting your home, the first thing you need to do is check your mortgage. Some mortgages don’t allow you to rent out your property, especially loans designed for primary residences. Your lender can tell you if you’re good to go or if you’ll need to refinance with an investment property loan. Remember, you must have lived in your home for at least 12 months before converting it into a rental.

Next, check your local laws and HOA rules. Some cities, counties, or homeowner associations have strict rules about rentals. You might need permits, a landlord license, or to register your home as a rental property. Ignoring these rules could lead to fines or legal trouble, so doing your homework is essential.

Lastly, don’t forget about insurance. Your standard homeowner’s policy won’t cover a rental property. You’ll need landlord insurance to protect you from tenant-related risks, property damage, and liability issues. It’s worth talking to your insurance provider to ensure you’re fully covered.

Now, let’s talk about the pros and cons. The biggest benefit of renting your home is the passive income. Rents are rising across the country, and you could make more than you think. Plus, tax benefits, like depreciation expenses, might make your rental income tax-free.

On the flip side, managing a rental can feel like a full-time job unless you hire a property manager, which adds extra costs. You’ll also need to set aside money for maintenance and repairs. And when you eventually sell, you’ll lose the capital gains tax exemption for primary residences unless you use a 1031 exchange, which has limitations.

So, what’s the right choice? It really depends on your goals, finances, and how much time you’re willing to spend managing a rental. If you’re unsure, I’m here to help. Send me an email at Laura@LauraMelquist.com or call at (303) 578-0755. Let’s chat and figure out the best option for your situation.